Nathan was sent to military expeditions to Sudan (1884–1885) and to Lushai, India (1889–1894). He was promoted to the position of captain in 1889 and became the secretary to the Colonial Defence Committee between 1896 and 1898. Nathan was promoted to major in 1898.

In 1903, Nathan was appointed as Governor of Hong Kong, a position he would serve until 1907. During his tenure, Nathan was credited with the establishment of a central urban planning and reconstruction policy, which regulated the growth of Hong Kong and built major thoroughfares in the Kowloon Peninsula. The construction of Kowloon-Canton Railway started under this period.

Nathan was appointed Under-Secretary for Ireland in August 1914, just after the outbreak of World War I and the signing into law of the Home Rule Act 1914.[6] His immediate superior was the Chief Secretary, Augustine Birrell. At this time the Lord Lieutenant of Ireland was largely a ceremonial position, and the Chief Secretary spent much of his time in London where he was a member of the cabinet, so the Under-Secretary was effectively the head of the administration in Ireland.[7] Nathan's job involved liaising with the Irish Parliamentary Party (IPP) to prepare them for self-government. He was also concerned with recruiting in Ireland, and received regular reports from the police and military about anti-recruiting and pro-independence activity, including the threat of a German invasion or arms landing in support of an Irish rising.[8] Alarmed at the growing numbers of separatists in the Civil Service, Nathan wrote to the authorities to have them transferred to England, and eventually got cabinet approval for a letter warning civil servants that they would be dismissed if they continued as members of the Irish Volunteers.[9] He used the Defence of the Realm Act 1914 to suppress newspapers he considered seditious, against the advice of the IPP[10] In general, however, he avoided any action that might provoke violence.

On Good Friday, 21 April 1916, Nathan was informed that a German boat had been stopped off the coast of County Kerry carrying arms and ammunition, and that a man had been arrested after coming ashore from another vessel. The man arrested was subsequently identified as Sir Roger Casement[11] A mobilization of the Irish Volunteers fixed for Easter Sunday was cancelled the day before. Nathan, believing that a rising had been averted, discussed with the Lord Lieutenant, Lord Wimborne, the necessity of raiding premises associated with the Irish Volunteers and the Irish Citizen Army and arresting their leaders.[12] Nathan cabled Birrell, the Chief Secretary, in London to obtain authorisation for these actions. On Easter Monday, 24 April 1916, while he was in his office in Dublin Castle awaiting Birrell's response, the Easter Rising broke out and Dublin Castle itself was attacked.[13] The Castle gates were closed and the rebels did not press the attack, but Nathan was a virtual prisoner until troops arrived from the Curragh Camp on Monday evening.[14] Nathan remained in the Castle for the rest of the week (being moved to the stables to accommodate the military) where he kept in contact with London, keeping the government up to date with the situation and helping to answer questions in Parliament.[15] The Rising came to an end on 30 April. The same day Birrell offered his resignation, and on 3 May, at Birrell's request, Nathan also resigned.[16] The Royal Commission on the 1916 Rebellion (the Hardinge commission) was critical of Birrell and Nathan, in particular their failure to take action against the rebels in the weeks and months before the Rising.[17]

After his resignation Nathan was appointed secretary to the Ministry of Pensions, a position he held until 1919. In 1920, he was appointed Governor of Queensland and served in that position until 1925. It was to be his last post in the Colonial Service. During his tenure, Nathan actively promoted British migration to Queensland. In 1922 he founded, along with Henry Caselli Richards, the Great Barrier Reef Committee. He was chancellor of the University of Queensland in 1922-25 and was awarded an honorary LL.D. in 1925. After his appointment as Governor expired, Nathan left Queensland for retirement in Somerset, England. He died in England in 1939.

Nathan Road, the main commercial artery in the Kowloon Peninsula (otherwise known as the Golden Mile), was named after him. In Australia, Nathan and Nathan Heights in Brisbane (the capital city of Queensland) and Nathan Street in the Canberra suburb of Deakin were named after him. Nathan House, a boarding house for Form 2 learners at Maritzburg College in Pietermaritzburg, South Africa is named in his honour. Scottburgh, South Africa also have a street named after Sir Matthew Nathan.